EU backs ‘Open-Skies’ airline agreement with Canada

The European Union agreed to deregulate air travel with Canada, expanding trans-Atlantic competition in the face of an industry slump after a similar EU- U.S. “open-skies” deal.

National governments approved a treaty letting EU airlines such as Air France-KLM Group and British Airways Plc fly to Canada from any airport in the 27-nation bloc, a step European regulators predict will increase passenger numbers by almost 40 percent within several years. Current rules force EU carriers to serve Canada from their home country, restricting competition among European operators as well as between them and Air Canada.

“This represents a huge leap forward,” Transport Minister Petr Bendl of the Czech Republic, which holds the EU’s rotating presidency, said after he and his counterparts from across the bloc gave the go-ahead to the market-opening agreement today in Brussels. The accord, drafted by EU and Canadian negotiators in December, will take effect after being signed by both sides at a May 6 summit.

The EU is opening international airline markets after its high court struck down aviation agreements between individual European nations and other countries. The European Court of Justice said in 2002 that the nationality-based route restrictions in these accords violated rules making the EU a single market.

The EU and the U.S. opened their trans-Atlantic air routes in March 2008 after four years of negotiations. This encouraged the European Commission, the EU’s regulatory arm that led the push for an accord with the U.S., to seek a similar agreement with Canada.

Economic Bite

Since then, airlines worldwide have eliminated jobs, cut routes and grounded planes because of the recession. Global airline losses may total $4.7 billion this year, the International Air Transport Association said on March 24.

The EU-Canada agreement may increase the number of passengers traveling between the two regions from 9 million in 2007 to 12.5 million within “a few years,” according to the commission. The deal could also generate more than 1,000 jobs and bring economic benefits of at least 72 million euros ($95 million) in the first year, the commission said.

Investment Rights

In addition to deregulating trans-Atlantic air routes, the accord allows cargo carriers to fly onward to third countries and foresees future steps in which both sides will allow investors to set up and control airlines in each other’s markets.

As these investment rights are established, EU and Canadian passenger airlines will gain the right to fly onward to third countries and to operate domestic flights in each other’s markets. This goes further than the EU-U.S. accord, which committed both sides to talk about a second-stage agreement involving domestic market opening.

European Transport Commissioner Antonio Tajani said the accord with Canada could help spur a deeper EU agreement with the U.S. “It’s a clear signal,” he said.

Like the deal with the U.S., the EU-Canada accord also involves regulatory cooperation in areas such as security, safety, environmental and competition policies.